Trouble Ahead for Ten Museum Park?

September 25, 2007 by Lucas Lechuga

Ten Museum Park

Those of you who have closely followed my blog know that I’m a big advocate of Ten Museum Park, for reasons that I have cited in the past. I’ve predicted that, of the condo developments that are scheduled to close within the next six months, Ten Museum Park would have the least amount of problems.

After reviewing the number of closings, as of late, at Ten Museum Park, I pray that my prediction pans out to be highly inaccurate. If, however, my prediction does prove to be true, then the Miami condo market is in for a world of pain. As I said, I pray that my prediction proves to be wrong.

Closings for units at Ten Museum Park began towards the middle of June 2007. As of last week, a total of 76 closings have been recorded since the middle of June. There are 200 total units at Ten Museum Park. Those 76 units represent 38 percent of the overall building. What has happened to the other 62 percent? A total of 6 closings occurred in the previous 4 weeks prior to last week. Closings are grinding to a halt.

Closings for units on the upper 15 floors only began within the past 3 weeks, so perhaps a significant percentage of units on those upper floors will ultimately close. That’s best-case scenario.

I know for a fact that many contract holders at Ten Museum Park have been dragging their feet to reach the closing table by asking for extension after extension. When push comes to shove, what percentage of the remaining units will close and what percentage will default? At this point, the bank must be calling the developer three times a day.

Let’s be optimistic for a minute and say that 30 percent of the contract holders at Ten Museum Park ultimately default. What does that mean for the rest of the Miami condo market? If a highly regarded development such as Ten Museum Park can have default rates that reach 30 percent, then what lies in store for the remaining developments that are scheduled to be completed within the next 6-12 months?

I expected high default rates to occur at Ten Museum Park in their 05 line, because of the lack of views, but a high amount of defaults have spread to the 05, 06 and 07 and 08 lines as well. After personally touring these floor plans, however, they all seemed to be smaller than the square footage that was represented at contract time, so I shouldn’t be surprised. Only the 01, 02, 03 and 04 lines seemed to deliver an interior space that was promised.

I’ve also predicted, in the past, that of the condo developments scheduled to close within the next 24 months, Opera Tower would have the most problems. Originally, closings at Opera Tower were scheduled for August. Then, they were pushed back to September. I don’t foresee closings to begin at Opera Tower until early November. I won’t be surprised if closings don’t begin until the beginning of next year. From what I’ve heard, the amenity deck at Opera Tower is at least one month away from being completed. I’ve spoken with several contract holders at Opera Tower who have no intention of closing on their contracts.

If the best-case scenario for Ten Museum Park is to have a 30 percent default rate, then what will that mean for developments such as Opera Tower? 50 percent defaults? 60 percent defaults? Opera Tower has 635 total units. That’s a bitch-ass high number of condos that will remain unsold at Opera Tower if those estimates prove to be true.

Let’s pretend to be ultra-conservative in our estimated default rates. Let’s say that the condo developments that are scheduled to close within the next 24 months have an average default rate of 10 percent. I’ve previously cited that 16,070 new condo units would be delivered within the next 19 months. Using our ultra-conservative default estimate of 10 percent, this would mean that 1,607 units will not close. How long will it take to fill this void? Your guess is as good as mine.

Miami is a market that will once again see double-digit growth within the next 10 years. How long will it be until we reach that point? The land that I walk on each day is paradise. There’s no doubt about that. Even Tony Montana said it himself, “This is paradise,” and we all know that all he has in this world are his word and his balls, and he don’t break them for nobody. But Miami was overbuilt. Right now Miami is in an adjustment period. Once the inventory in the condo market is absorbed then paradise lost will once again be regained. But how long will that take?

I’d love to see your comments. How long will it take to fill this large supply of Miami condos?

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28 Comments on "Trouble Ahead for Ten Museum Park?"


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Anonymous
Juan Leal
9 years 4 days ago

If market conditions remain the same and the current absorption rate continues then it will take approximately 8-9 years to absorb the new and existing Brickell inventory.However I believe the absorption rate will increase towards the end of this cycle and perhaps shortening by 2-4 years, but who knows.

Anonymous
Steve
9 years 3 days ago
Juan – That is the Brickell Inventory…I would think that the north of the river, east of 96 corridor to be worse since it is, in many ways, less desirable. What Lucas doesn’t consider is how many units are already on the market, how many are on the sidelines waiting for the market to improve or until the owners lose their patience, how many new units that will close that will also be really for sale and a normal amount of unit turnover for normal reasons. For example of your 10% assumption, there is another 15-20% that is normal turnover… Read more »
Anonymous
9 years 3 days ago

The 16,070 units is the inventory from the southern end of Brickell to NE 36 street.

Anonymous
a
9 years 3 days ago

I would image 10 museum to be rather safe since it will target affluent foreign buyers who need not worry about mortgage rates and appraisals, as they can pay cash.

For the general condo market, it is impossible to predict. Political instability in any of the latin american nations can lead to a quick flight of their upper and middle class to Miami and eat up supply.

Anonymous
David
9 years 3 days ago

Perhaps the developers will have to be more accommodating to potential purchasers:
1. provide finished units (not just developer ready, i.e. bare concrete floors) so that the purchaser will not have to finish the unit so that it will be “occupant ready”
2. give more parking options other than “mandatory” valet; i.e. offer self parking that is assigned and deeded to the purchaser’s unit
3. provide cash incentives (perhaps a couple years worth of waived monthly fees)

Anonymous
Brian
9 years 3 days ago

Could it be because the common areas are not completed yet? I know I would have not closed this summer, even if I intended to later, if the lobby and common areas still looked like a construction zone. I cant believe they were demanding people to close so early.

Anonymous
9 years 3 days ago

Lucas,

I don’t know why you insist that Ten Museum Park should perform better than other condos in the downtown area. I see a LOT of drawbacks for this development. Brian and David (above) mentioned just a few, but I consider these to be very significant. I would be *very* hesitant to close if I was a buyer of Ten Museum Park.

Anonymous
Mark
9 years 3 days ago
IT’S THE LOCATION! Lucas, I think you’re the greatest and that this site is amazing and all, but i respectfully disagree with your assessment on this building. I’ve driven by and around it since your prior rebuttal. No matter how nice a building’s lobby and pool is, if it’s surrounded by dilapidation and homeless people, it’s not going to be an attractive place to live. i’ve walked through bayfront park several times on a weekend and believe me that is not where a middle/upper class person wants to enjoy his free time. come to think of it i cannot think… Read more »
Anonymous
Joe DiA
9 years 3 days ago

Lucas,
museum park is a nice building but to be honest with you i would rather buy a condo at brickell.
Brickell is developed and it has own style. I think certain locations at Brickell will be fine and will close. Buildings that have not such great location will have trouble. In real estate is all about location location location.

Anonymous
9 years 3 days ago

I agree about location…

The only developments that will currently benefit from being in the downtown area are 50 Biscayne and Everglades on the Bay. These are the only ones that will truly be “walking distance” (less than 2-3 blocks) away from stores, restaurants, and financial institutions. The rest of the condos in the vicinity are still pretty far from the core and it will be a long time before their immediate surroundings develop.

Anonymous
Jose Laya
9 years 3 days ago
Hello to all… Steve – you are absolutely right, many buyers are sitting on the sidelines. David – I agree 100% that developers need to be more accomodating. Comment #2 about parking, that is the one I feel strongest about, but I just don’t see a solution for that. Builders try to maximize every useable sqft to offer the most number of units. I don’t mind the mandatory valet, but having to pay for a second parking spot if you buy a 2 bedroom condo… that’s garbage. Mark – You’re right on regarding a building’s location and the fact that… Read more »
Anonymous
Jaime
9 years 3 days ago

Brian’s point is excellent. It’s no fun to move into a work in progress after signing a lot of money into a project.

The prospects of the building is great, but they need to execute and finish. Right now they are slacking and not working quick enough.

Anonymous
RA
9 years 3 days ago
Good points from all the comments. I remind myself the days in the early 80’s of Lincoln Rd and South Beach. Lincoln Rd was a slum with bums all over the place. SOBE was full of drug dealers. Give or take 10 – 12 yrs later into the 90’s and it’s a mecca. So perhaps this is the same fate for downtown. I bought at Marina Blue and perhaps now it may not be the best area to live in but as Lucas and Tony Montana said…”this is paradise” and as a born and raised Miami’an I’ve seen the changes… Read more »
Anonymous
RA
9 years 3 days ago

Question….since it was brought up. If the common areas are not ready can you be forced to close? And if so, then how would you justify the full maintnence fee if you can’t utilize the common areas. Such as a pool with no water or a gym with no equipment. Would a maintence fee be pro-rated?

Anonymous
9 years 3 days ago

Yes, the full maintenance fee is collected regardless of the % completion of common areas/amenities. This is the grim reality many buyers are discovering with a number of the smaller developers. The Related Group delivers their buildings ready to be enjoyed.

Anonymous
9 years 3 days ago

First of all I just want to say that I appreciate that some of you are disagreeing with me. It makes for a more interesting conversation. My blog is a mix of fact and opinion, so any topic is definitely open for debate. When I first started this blog, I often wondered whether anyone even read what I had to say. It’s amazing what word-of-mouth marketing can do (and Google doesn’t hurt either).

Anonymous
9 years 3 days ago
A real problem IMO with Ten Museum are the bathroom areas – what were they thinking? If ever style over substance… They make the one bedrooms useless. Great pool deck though, gotta give them that. I have said from the start though that grouping of buildings doesn’t make much sense – with such high pricing in THAT neighborhood? I don’t know many millionaires that are interested in living in the hood – not even with the view. I live downtown and I’ll tell you that where I am (Loft Downtown on NE 3rd) it is actually pretty nice. Sure I… Read more »
Anonymous
9 years 2 days ago
Enjoyed the reading and the comments. I must say that RA has hit a great point with the analogy to Lincoln Rd. Fortunately, I don’t think that the Biscayne area N & S of 395 will have to with 20 years BUT, those who see the light at the end of the tunnel for both Miami and the RE market will surely enjoy their investments as the area transforms. Although shady, sketchy, and sometimes scary! the City of Miami and its’ residents aren’t going to let the homeless and riff-raff control future development and revenue producing opportunities. Patience will be… Read more »
Anonymous
Julio Bonilla
9 years 2 days ago
Great site Lucas, excellent comments here as well. RA and Jose Laya appear to have slightly different views on the surface, but I beleive they are both right. Yes, prices are way too high in Downtown right now, but if you take the 7 – 10 year approach, Downtown, and Miami in general, are going to be more amazing than even the glossiest developer renderings or slick illustrations during the boom could capture. I lived in the lower east side of Manhattan in the early ’90s and watched as a drug infested, crime ridden area with poorly maintained structures transformed… Read more »
Anonymous
9 years 2 days ago
Julio, The same thing is happening with Chicago. The area immediately south of Congress has transformed tremendously within the past 5 years. Bucktown and Wicker Park have also seen vast changes. Mark, Chicago is city that has desirable property near a stadium. In fact, the neighborhood of Wrigleyville revolves around the stadium. Properties there aren’t high-end but it is a desirable place to live. It wasn’t always so, however. In the 1970s the properties surrounding the stadium were rundown. San Francisco is the only other place I can think of that has properties near a stadium that are desirable.
Anonymous
RA
9 years 2 days ago
All valid points from eveyone. We don’t have a crystal ball but a future unwritten. Off the subject here’s a topic and point of discussion. See all those fancy advertsments hanging on the side of TMP like the Infinit Car Ad. Question if someone can answer. The revenue from those billboard…in whos pocket does that go to? Those ads can run from $20k – $60k p/month or more. I know because I choose the locations for my products to be advertised. So if the ads are making that revenue shouldn’t that go to the HOA? If that’s the case then… Read more »
Anonymous
9 years 2 days ago
The revenue from those ads likely goes to the developer. The Sunglass Hut ad on the front of 50 Biscayne was removed about three weeks ago in preparation for closings to begin. You can be sure that The Related Group won’t have banner ads on any of their buildings once the first closing has occurred. Is the Infinity ad still on TMP? I don’t remember seeing it this week but I may be mistaken. If it is then that’s an indication that the developer is having problems. I’m shocked that it remained on the building after closings began.
Anonymous
Runtun
9 years 2 days ago

RA, good point. However, I assume that until the owner turns over control to the Condo Association, he retains ownership (at least legal title) to the units which have not closed. Owning a majority of the units (and therefore a majority of the pro rata share of the common elements) his decisions would win out in relation to any vote on what to do with those elements. Just guessing, though.

Anonymous
Brian
9 years 1 day ago

Remember, there is an office and retail component of TMP. The condo association does not own the entire building. The developer will eventually, if not already, sell the office/retail portions once fully leased. There is little to no chance that the ad revenue will go to the residential association.

Anonymous
Jose Laya
9 years 8 hours ago

Hey RA great comment… That’s what makes the world go around. Everyone has a different view. As in the financial services industry, where you have several analysts that have different views on the same company. Does that make one right and another wrong… No.

By the way, I did see the big Infiniti Ad and I wondered the same thing. However, Runtun is right the owner has control of the bldg. I would venture to say it is using some of that ad revenue to pay its creditors.

Anonymous
RA
9 years 4 hours ago
Yep…I saw the Infiniti Ad and yes the ad on 50 Biscayne for Sunglass Hut went down. So in that case TMP must need the extra revenue vs the Related 50 Biscayne. Kudos’s to them because they haven’t even closed. Again good biz practices is key. I hope Hyperion delivers with amenities finished @ Marina Blue vs what they did @ Blue with no gym for a year. That wasn’t good biz practices. A big selling point @ MB was that Sky Beach so it better be there along with a functional gym when I move in or I’m going… Read more »
Anonymous
Jason Morgan
8 years 9 months ago
WOW! There are some really great points brought up from all of you, but now its time for me to throw my worthy two cents in! 10 Museum Park is an outstanding building, too bad its not on Ocean Drive or Collins Ave.. Now that I said that, I feel the location to be the worst of the bunch, along with Marquis next door. Great views, YES, but the block behind the buildings isnt even safe in the day time with police around! Could you imagine at night? You pay over half a million dollars and cant even venture 2… Read more »
Anonymous
Kent Karlock
7 years 11 months ago

The buildings on this corridor should not have been built. The community infrastructure does not exist for the targeted luxury clientele. Miami Beach offers better values with well developed retail and entertainment offerings and direct access to the prime amenity of South Florida: the Atlantic Ocean. The projection among real estate analysts is that values along Biscayne Boulevard will decline to below replacement cost.

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